
What job do you give your savings?
Howdy, everyone. I've asked a similar question before, but hopefully with a somewhat different emphasis. I know that in YNAB we are supposed to give every dollar a job. My question is, what do you do with longer term savings.
Suppose I've allocated money for next month's expenses and the next month after that and I have an emergency fund for unexpected expenses in any given month. Now I am onto creating a cushion for 6 months or more and after that some kind of longer term savings (I should be so lucky!)
Should I match all those savings up with goals, like paying off my mortgage or buying a new car (which I don't plan to do in the near future but eventually)? Should I create some kind of "long term savings" category and is that really a legitimate "job" for my money, since I don't have a specific plan for it? Or...?
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All of that. I have a Savings master category and under that I have a six month Income Replacement fund, a Vacation fund, a Gadgets fund, a Christmas fund, a Car Replacement fund, etc. Whatever your long term goals are, make a category for them. But you should have a plan for them. However, the beauty of that is that your plans can change and you can move funds from one category to another if they do.
I don’t have plans to buy a car in the near future either but I have a Car Replacement category that I fund month after month which will allow me to pay cash for my next car when I do.
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Oh my, the problems that the YNAB method creates, what purposes can I find for this extra money. I do like @Superbone, I have several true expense categories for things like car replacement, vacation, taxes... I also have a general savings category to throw extra money into which I do not have a current plan for.
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Current long-term savings goals:
- Kiddo's college
- Car replacement
- Paying off Wife's Student Loans
- Roth IRA funding
- House Down Payment savings
- Unexpected car repairs/tires/other major items
Once we buy a house, the down payment savings will get traded for various maintenance items - water heater, HVAC, roof, driveway since we live up north and most driveways are paved, exterior paint if applicable, and that's what I came up with in a couple minutes.
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Our long-term savings categories are currently broken into two groups, Mid-Term Goals and Retirement & Savings.
Mid-Term Goals include:
- Vacation
- Exercise stock options
- NMI (Next Month's Income) also lives here as a holding bin
Retirement & Savings includes:
- Income Replacement (aka 3-month emergency fund)
- Fund IRAs (an annual goal that we save toward monthly)
- Taxable Investing (when this category hits a certain level, we invest it)
When a chunk of non-salary money comes into our world, we often make a temporary category where we stash the dollars while we think of how we want to allocate them. This gives every dollar a job while preventing us from frittering away the funds on something we would later regret.
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Powder Blue Pony said:
Now I’ trying to sell him on YNAB. No chance though. He’ll keep forecasting.my dad, that is. My son has his own budget in my YNAB account
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Jen L said:
When a chunk of non-salary money comes into our world, we often make a temporary category where we stash the dollars while we think of how we want to allocate them. This gives every dollar a job while preventing us from frittering away the funds on something we would later regret.Absolutely, we do the same. I've got a few "holding categories" One for things such as tax return/stimulus check, etc. is called "Cash Holding" where I simply hold it there until we decide what to do with it. If it was sitting in TBB, or any other category, it wouldn't be obvious that it was "special" and could very easily get spent on frivolous things. Not that frivolous things are bad, as long as you are intentional about being frivolous.
So the money sits in Cash Holding until we decide what to do with it. I also have a "Slush Fund" which is usually between $100 - $200 at the beginning of the month. At the end of each month, for some select discretionary categories, if there's anything left, it gets siphoned into Slush Fund. If it's more than $200, it goes somewhere else. But it's used for WAMing when categories get overspent, and for little extras here and there that weren't really budgeted for.
There's also a couple others, of course Income For Next Month, holds all my paychecks until they're distributed at the end of the month/beginning of next month, and 2 different Deferred Income categories, one for my wife, and one for me. My wife has variable pay, so when she gets a paycheck above her average, it goes into there, and is pulled from when she gets lower than average paycheck. And since I'm paid fornightly, I get the occasional 3 paycheck month. My Deferred Income category will be used for holding that extra check, and distributing a portion out each month to even out the hills and valleys (It hasn't been used for this yet, because I just recently made it, and my next 3 paycheck month isn't until July, but that's what it WILL BE used for)
These all are in a "Holding Categories" group at the top of my budget. (Oh yeah, there's also a "general reimbursable" category in there too)